Editor’s note: This market commentary is provided by the Dairy Division at FCStone in Chicago, Ill.

Class III and cheese futures fought a two-sided battle yesterday as the markets caught a mid-day tailwind from a higher spot cheese session. Block cheese is back over $2.00/lb.; barrels rose by just a penny, but the increase was enough to send buyers scurrying into nearby futures.  That rally quickly faded, however, as the current spot cheese market seems eerily reminiscent of the most recent push to $2.0375/lb. on May 28, which abruptly failed.  We see the market as being in some semblance of equilibrium. Technical indicators are still murky, but the fundamentals point towards enough available fresh cheese, limiting further price advances.

Milk production seems to be chugging right along in Idaho, Colorado, Kansas, New Mexico and Texas. California seems to be getting a little tighter on production this week.  The Upper Midwest continues to evade a big flush, but generally favorable weather (save for a recent deluge in certain parts) ought to help digest those first cuttings of hay.  While we’re not seeing any material tightness in milk nationally, we’re just not seeing as much as we expected at this time of year, and that keeps thoughts of hot, summer weather on the forefront of buyers’ minds.

The shoot-em-up wild trading days for spot butter have garnered the limelight lately, but it seems the futures market participants are quietly exiting stage left. Long-term appetites for buying butter over $2.00 have cooled in the past few sessions as futures have corrected to the downside day after day.  That said, we expect some level of futures buying to re-emerge here as we’re still a $2.00/lb. butter market.  But we do expect to see spot butter fall below $2.20 to close the current spot-futures pricing spreads.  Ultimately we look for some convergence of spot and futures in the next few days. 


June 4 spot session results:

Block cheese: $2.0350 (up 5.5¢)

Barrel cheese: $1.9450 (up 1.0¢)

Grade A NFDM: $1.8600 (up 0.25¢)

Butter: $2.2600 (unchanged)


Today's expectations:

• Class III & Cheese to open mixed

• Dry Whey to open lower

• Class IV, Butter & NDFM to open mixed


Grain futures

Favorable weather continued to apply pressure to corn market yesterday as futures closed lower for the fifth session in a row.  Soybeans traded both sides and closed mixed, with old-crop higher and new-crop lower. Technically, soybeans and bean meal are showing growing signs of weakness, so we do expect to see limited rallies and more aggressive sell-side days in the coming weeks. The Commerce Department reported April soybean imports at 7.1 million bushels, well below expectations.


Today’s expectation:

• Corn to open lower

• Soybeans to open lower


FC Stone's annual Dairy Outlook Conference will be held June 18-19, in Chicago. Visit www.intlfcstone.com/events for information.


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